Chevron Corp posted much lower-than-expected quarterly earnings on Friday as maintenance exacerbated a steady decline in oil and natural gas production and as a huge fire at one of the company's California plants hit the refining business.
Shares of the second-largest U.S. oil company fell more than 1 percent in early trading.
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Increasing output has been a struggle for many big oil companies, including Exxon Mobil Corp and Royal Dutch Shell Plc. With oil and gas assets tightly controlled by the countries where they are located, the majors are left to drill in pricier regions on land and offshore.
Chevron's third-quarter oil and gas production fell to 2.52 million barrels of oil equivalent per day from 2.60 million bpd a year earlier. On quarter-to-quarter basis, the production number declined for the third period in a row.
Net income in the quarter fell to $5.25 billion, or $2.69 per share, from $7.83 billion, or $3.92 per share, a year earlier.
Earnings dropped 17 percent to $5.1 billion in the oil and gas production business and plunged 65 percent to $689 million in the refining, or downstream, operation.
"Downstream was the primary culprit behind the miss," Simmons & Co analysts said in a note to investors. The reported profit included about $600 million from an asset sale gain, offset by a negative foreign exchange impact, they said.
Leaving out certain items, Chevron earned $2.55 per share, compared with the analysts' average estimate of $2.83, according to Thomson Reuters I/B/E/S.
Chief Executive Officer John Watson said the earnings were weighed down by heavy planned oilfield maintenance. Pricing for the company's output was also weaker, in part because of the now-oversupplied U.S. market for natural gas liquids. The quarter's average Brent oil price of $110 per barrel was down $2 from a year earlier.
A storm cut into Gulf of Mexico production, while planned maintenance in Kazakhstan and the United Kingdom caused the majority of the production decline outside the United States, according to Chevron.
The company had already warned last month that the crude unit at its oldest refinery in Richmond, California, would remain offline through the fourth quarter after it was badly damaged in an Aug. 6 fire.
Shares of Chevron were down 1.2 percent at $110.10 in early trading on the New York Stock Exchange.